The South African data card heats up today with September money supply and private sector credit growth data scheduled for release. Credit demand is a key determinant of economic and inflationary cycles. Private sector credit growth accelerated to +4.9% y/y in August from +3.5% y/y in July. A surge in corporate credit demand drove August’s acceleration, while household credit demand growth remained essentially unchanged. Reading too much into August’s acceleration is tempting, especially when searching for any signs of GNU-inspired confidence.
Unfortunately, when adjusting for month-to-month volatility, both corporate and household credit demand dynamics are still weak. Thus, given that interest rates were lowered by 25bp in September, this week’s print will be useful as a true measure of built-up credit demand and confidence. Bloomberg consensus estimates expect credit demand to slow slightly to +4.24% y/y in September, implying that despite all the optimism related to the GNU, traction on the ground remains limited and the business cycle constrained.